Optimism about business activity in the construction sector recently reached its highest level in two years, according to the latest survey.
Despite marginally subdued new orders and an ongoing decline in construction output, business activity expectations in January registered 48.8, up from 46.8 in December and the highest reading since August last year.
However, the S&P Global UK Construction Purchasing Managers’ Index (PMI) also remained below the crucial 50.0 no-change threshold for the fifth month running, signalling a moderate decline in total industry activity.
Around 51 per cent of survey respondents forecast a rise in business activity during the year ahead, while only 12 per cent predict a decline.
This pointed to the highest level of business optimism since January 2022.
“Looser financial conditions” and more favourable underlying economic prospects could soon turn client demand around, construction buyers said.
Civil engineering was the best-performing segment in January (index at 49.8), with output levels close to stabilisation.
Commercial activity also showed resilience, with the index pointing to a marginal rate of decline (49.1).
Meanwhile, house building continued to fall sharply at the start of 2024 (index at 44.2).
“UK construction companies seem increasingly optimistic that the worst could be behind them soon as recession risks fade and interest rate cuts appear close on the horizon,” said Tim Moore, economics director at S&P Global.
“The prospect of looser financial conditions and an improving economic backdrop meant that business activity expectations strengthened to the highest for two years in January. Moreover, there were again signs that customer demand is close to turning a corner as total new orders fell to the smallest extent for six months.
“Relatively subdued pipelines of new work nonetheless resulted in lower levels of construction output for a fifth successive month in January. House building remained by far the weakest-performing category, despite the rate of decline easing to its slowest since March 2023.
“Meanwhile, higher prices paid for imported items contributed to a rise in overall cost burdens for the first time since last September. However, there were still signs of space capacity across the construction supply chain as vendor delivery times shortened again at the start of 2024 and sub-contractor availability increased at a robust pace.”
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